Our Porous Safety Net

August 25th, 2011 at 4:03 am

As my CBPP colleague Donna Pavetti points out, Monday was the 15th anniversary of welfare reform. Her trenchant analysis finds what many of us have been saying for a while about this: redesigned welfare—called TANF (Temporary Assistance for Needy Families)—is a fair weather ship. It does OK, even pretty well, in calm waters. But it founders in a storm.

Or, less artfully, under the full employment conditions of the latter 1990s, the welfare-to-work requirement worked better than many of us expected. Demand was very strong and employers actually had to bid wages up to get a keep the workers they needed, even in the low-wage labor market. The employment rates of single moms rose to historic highs—their poverty rates, as you’ll see below, fell.

But when those conditions evaporated in the recession of 2001—and they haven’t been back since—big holes in the safety net began to appear.

Donna’s graph reveals that dynamic, especially with respect to the Great Recession. Despite the fact that unemployment rose sharply, as did the number of poor families, the welfare caseload was completely unresponsive (note that the numbers of poor families with kids grew throughout the 2000s, again with no response from caseloads).

It’s supposed to be a safety net, folks. It’s supposed to be countercyclical…to catch the most economically vulnerable when the market fails. And for that matter, help pave the way for less advantaged folks to find their way back into the job market in good times—that, in part, was one of the promises of work-based welfare reform.

[BTW, I recall Bill Clinton raising the minimum wage in something like the same week he signed the welfare reform bill. He viewed them as complementary, in that if you’re expecting to increase supply in the low-wage labor market, you need to have a decent wage floor in place. At some point in the none-too-distant future, we should be thinking about another increase in the Federal minimum wage.]